A week ago a donations box for jihad sat on the counter of the Subway sandwich restaurant in Gulberg, a bustling middle-class suburb of Lahore. By Friday it was gone.

"Sorry, management ordered us to remove it," said the cashier behind the till.

The transparent box - one of hundreds in businesses across the city - solicited contributions to Jamaat-ud Dawa, an Islamic charity widely seen as a front for a jihadi militia fighting Indian forces in the disputed territory of Kashmir.

The boxes were withdrawn as part of a wide-ranging crackdown on domestic militants after allegations that the perpetrators of the recent bomb attacks in London had contacts with at least two Pakistani groups.

In the past week, the president of Pakistan, Pervez Musharraf, has ordered a freeze on such fundraising, the arrest of more than 600 people and the expulsion of foreign students from madrasa religious schools.

But President Musharraf has ordered several such sweeps since 2001, only for the militant groups to spring up again after lying low for a while. Sceptics are unsure whether there is serious intent behind the present crackdown. "If you want to make a contribution, just wait a few months," the Subway cashier said. "By then the boxes should be out again."

Diplomats and analysts say Mr Musharraf is reluctant to dismantle the jihadi groups - which have waged a violent campaign in Kashmir since the late 1990s - because they provide useful leverage in negotiations with Pakistan's old foe, India.

There was substantial progress towards peace between the two countries earlier this year but the process has slowed over the past month.

The worry for the west is that the groups operating in Kashmir - fired up by Islamist ideology and anger over the US invasions of Afghanistan and Iraq - are lending their expertise in violence to al-Qaida.

Bomb attacks on westerners, two assassination attempts on Mr Musharraf and the murder of the American reporter Daniel Pearl have all been attributed to Pakistani militants with al-Qaida links.

The London bombers appear to have moved in the same militant circles. Last week, the New York Times reported that the Circle Line bomber, Shehzad Tanweer, was trained at a camp north of Islamabad run by the Kashmir militant outfit Jaish-i-Mohammad.

There are also unconfirmed reports that Tanweer visited a madrasa run by Jamaat-ud Dawa. Since splitting from the militant group Lashkar-i-Taiba in December 2001, Jamaat has claimed to prosecute jihad through good works, not guns.

Jamaat tends to the sick of Pakistan using a fleet of 150 ambulances, 600 medical dispensaries and a team of doctors, said the Pakistani information secretary, Mohammad Yahya Mujahid, in Lahore.

Wearing a long, scraggly beard of the type usually associated with deeply conservative Muslims, Mr Mujahid said that the organisation runs 137 schools and 40 madrasas. It also sends a team of clerics to mosques around the country to "preach and discuss political issues facing Islam".

And, most importantly, according to Mr Mujahid, Jamaat has severed all ties with the Lashkar-i-Taiba gunmen in Kashmir. "That chapter is completely closed," he said.

But few believe him, not least the Pakistani police. About 115 Jamaat members were arrested last week under anti-terrorist laws, although more 75 of them have since been released.

"Our people are always arrested but the courts let them go," Mr Mujahid said confidently. "We are law abiding citizens."

Groups such as Jamaat-ud Dawa present a sharp dilemma for Mr Musharraf. Although their madrasas do not train fighters, analysts say, they provide a pool of indoctrinated young men from which the militant wings can recruit.

The young jihadis are directed to a network of secret training camps in a heavily forested area in Pakistan-controlled Kashmir. Some of the same camps are allegedly linked to al-Qaida.

Two al-Qaida fighters captured recently told investigators in San Francisco they were trained at a camp run by Kashmir militants near Rawalpindi.

The claim remains unconfirmed, and the interior minister says such training camps do not exist.

Last week Mr Musharraf vowed to arrest every extremist "bigwig" in Pakistan. But if he cracks down too strongly on the Kashmir groups, he risks a backlash from powerful Islamic parties.

Nevertheless, diplomats say it is a step he must take to root out his country's troubled association with al-Qaida.

"We need to see action across the board, a complete change of policy - not just selective actions," one diplomat said.